In the 'good old days', when we had finished the day's photography, we would disappear into the darkroom and spend hours breathing in the fumes of nasty, smelly chemicals in the pursuit of our art, now we have Adobe Photoshop.
Posterization occurs when an image's apparent bit depth has been decreased so much that it has a visual impact. The term posterization is used because it can influence your photo similar to how the colors may look in a mass-produced poster, where the print process uses a limited number of color inks. This effect ranges from subtle to quite pronounced, although one's tolerance for posterization may vary.
"Color management" is a process where the color characteristics for every device in the imaging chain is known precisely and utilized to better predict and control color reproduction. For digital photography, this imaging chain usually starts with the camera and concludes with the final print, and may include a display device in between.
A color space relates numbers to actual colors, and is a three-dimensional object which contains all realizable color combinations. When trying to reproduce color on another device, color spaces can show whether you will be able to retain shadow/highlight detail, color saturation, and by how much either will be compromised.
Color is a visual property of perception. Camera chip interprets the light that passes through the lens in a similar way as our brain interprets the light passing through our eyes. Our perception of color is a result of the journey undertaken by light.
Light travels from the light source onto an object and then it bounces off the object and continues to travels through our eyes onto receptors. Then information received is processed by the brain. The brain, being very considerate of our psyche, it balances the color of the light to a white point (simulating daylight).
The camera works in a similar manner as the human eye + brain: the light enters the lens and falls onto sensor and then the data gets processed and the software/firmware assigns corresponding values based on camera settings.